How ConvertKit acquires and keeps loyal customers by focusing on a specific niche

Nathan Barry

|

CEO & Founder

of

ConvertKit

Nathan Barry

Episode Summary

Today on the Churn FM we have Nathan Barry, founder, and CEO of ConvertKit!

In this episode, we talked about what drove Nathan to start ConvertKit, how switching to focus on a niche has impacted the company's product strategy and churn rate, and how it helped Nathan to focus on the right customer feedback.

We also discussed when it doesn't make sense to worry about churn, the concept of gradual engagement and how ConvertKit applied it in their product, and why Nathan thinks every company is doing onboarding wrong.

As usual, I'm excited to hear what you think of this episode, and if you have any feedback, I would love to hear from you. You can email me directly on Andrew@churn.fm. Don't forget to follow us on Twitter.

The thought process on why ConvertKit changed to their recent pricing package and how it impacted their churn rate

00:15:25

The concept of gradual engagement

00:17:51

What Nathan would do to help a company turn a bad churn situation around

00:29:20

Why Nathan thinks everyone is doing onboarding the wrong way

00:32:57

Transcription

Andrew MichaelHey Nathan, welcome to the show.

Nathan BarryHey, thanks for having me.

Andrew MichaelIt's great to have you today. For the listeners. Nathan is the founder and CEO of ConvertKit, an email marketing company for creators that now does over $10 million in annual recurring revenue. Prior to ConvertKit, Nathan held various freelance and UX designer roles. So my first question for you, Nathan is why email marketing and creators? What drove you to start ConvertKit?

Nathan BarryYeah, those are good questions. So I got started with email marketing, to back in 2012. I was writing an E book designing products. So the book was about how to design iPhone applications. Start building audience around that and I use MailChimp to do that. And I built an email list of almost 100 people launched my ebook it sold super well did 12 grand in sales in the first day. I was blown away. But one thing that really stood out to me was

how, like, how many sales came through from email as opposed to you Know social channels and the website and stuff like that. So I was really, really surprised by that. And

you know, from there, I thought, Okay, let's go all in on email. And then that drove me down this path of learning on best practices. And then going from there, I started going about, okay, here's the limitations of MailChimp. And definitely three or four months later in January of 2013 that I decided to start ConvertKit

Andrew Michaelnot really scratching your own itch because that was gonna be one of my other questions was like with MailChimp and some of the other dominant players in the time. It was It must have been like a very brave decision as well to say, okay, we're going to go out and do something better and beat them but I think the one thing that you've done amazingly well really is your product marketing is on point. Like he's really speaking to a specific niche and was that just purely because like you were a creditor yourself, you decided, Okay, like, this is an untapped market because they're not serving this need and like, what was the main motivation then to really like double down on that niche?

Nathan BarryYeah. The switch to that niche really had to do with? Well, first, I was realizing that building a software product is trying to serve an entire category to try to serve everyone is really a fool's errand. getting traction, we just like, Yeah, we do email marketing is really, really hard. Especially because there's so many other products out there, right, so many, you know, products in particular. And so, I like you and I could sit here and we could list off probably a dozen, two dozen, I don't know, you know, products that do over 10 million a year in revenue, like, there's really a lot. And so we just weren't getting traction, we weren't able to differentiate, it was really hard to write marketing copy, like everything. And friend of mine really said, Hey, you gotta focus in a specific niche. And that was advice that I knew, but I hadn't done anything with like, I would actually give that advice to other people when they were talking about building an audience or writing a book or something. I would say like, Oh, you've got to narrow the topic down focus on a specific niche you know, know exactly who you're selling. Problem four. Yeah. So with that I ended up once I started taking that advice, everything got easier. So it took us two years to get to 2000 a month in revenue. And then after implementing that change, you know, six months later, we were at 15,000 a month in revenue in six months after that we were at 100,000 a month. So there's a lot that went into that, obviously, you can't just like pick a niche, and then, you know, you have a 1 million AR business, but it played a huge role to go all in on. First it was professional bloggers, and then we eventually broaden that to include all creators.

Andrew MichaelCool, I want to go deeper on this thing as well, because definitely, it's something that you hear about often people hear the voice voice and I think for founders, it's always sort of like a little bit of nervous feeling is like, what if you pick the wrong niche like why am I narrowing the market and you have all these negative connotation we go to it but time and time again, you hear this advice, pick a niche focus, double down and you'll see results and obviously listening to you now as well, there's proof in the pudding. So what was the process? Like when you went to go down and pick a specific niche, like you pick bloggers to begin with you said, and then you really realize the end was creators. But how did you go about deciding that? What was sort of the research that went into it?

Nathan BarrySo I, you know, I was a blogger myself, I lived in the space. And so I tried to think of, Okay, what are, let's just go to specific people, and I could actually still list them today. It would be people like Chris guillebeau, who's an author, and blogger, nobody thought of him as an author, you know, someone else's guy named Joel Runyon, who ran a popular fitness and Paleo Recipe blog site. Training, who else but there's a decent number of authors in particular, who had these, you know, blogs, online businesses, and then written some books as well. And I thought, okay, that's ConvertKit ideal customer there. They know the value of email. Well, let's try get more of those. So then chose email marketing for authors as our market and just ran with that change the headline. I don't know what it was before, but I changed it to email marketing for authors. And then a couple things happened right away. One, the sales copy on the marketing site became so much easier to write because all the examples could just be author focused. It was remarkable. Like it was unlocking a copywriting superpower because it was just like, oh, man, it all just flows easily instead of trying to like, broadly right for all different kinds of creators. Yeah. And the next thing that I did, or that happened was it was really easy to find people to promote. So we would end up with all these different, you know, just partner with people who had an audience of authors and say, Hey, let me teach all the authors in your community how to do email marketing, and as part of it, maybe some of them will end up signing up for ConvertKit. And people, you know, compared to the tension again before people were lining up to convert gay to, you know, have you come talk to their communities. So that was really impressive. But then the third thing that was less fortunate is about a month and a half a month or month and a half into this, I realized that the people we were attracting were total beginners. They were the ones not like when I said author, I was thinking like, oh, someone, you know, has a really successful book. They're either on the New York Times list or they're aiming for it or something like that. And really, what we ended up attracting was a lot of people who, you know, their dream was someday to self publish a book on the Kindle Store. And, you know, they still had to build their writing habit and writing is really hard. And, you know, and they didn't have a lot of money to dedicate to the hobby and, and so then they would sign up for an account and then then cancel after a month or two. And so I started to think, okay, I thought authors was the best term, but maybe, maybe it's not. I I started digging more in and that's when I came to the professional bloggers. So saying it's four series. People write putting a professional in there. But anyone who's not a professional blogger they may aspire to be. So why not get the tools that the professionals or you are using? So that that was kind of that shift? There were plenty of people who said, like, Oh, I'm not a blogger, I'm a podcaster. But they were in the space. And often they understood the term, but that totally worked.

Andrew MichaelI'm one of them as well. I'm a convicted fan.

Nathan BarryYeah. Yeah. And so we've got, you know, a lot of people in that space who, you know, if you're a podcaster, you understand blogging as well. And so you're like, generally people were like, Great if it works for bloggers. It'll work for me. Yeah, and in there. The other thing that made a big difference is we started doing direct sales. So I would reach out to specific bloggers and try to get them on board. I'd carve out a specific niche for like men's fashion bloggers, paleo recipe, bloggers, you know, things like that, to try to really go after a niche that we already had a little bit of traction, and then yet, you know, four or five or 10 other customers in that niche. And that paid off really well. And then later on, we broaden See creators because we were trying to get musicians and artists and filmmakers and chefs and you know, and it's like, okay, creators is all encompassing and you don't have to do that like, but I'm a podcaster not a blogger sort of dance. It's like we're all creators, but we're all still so different from like the, the real estate, small business or the cupcake shop or whatever else.

Andrew MichaelExactly. I think also, one thing that helped you as well with nothing excellent that you use is sort of this social proof and ambassadors that you have. So you've managed as well like as a result of doubling down and having a really specific focus a niche to be able to find some really big and influential people in this space to help promote your products as well. And sort of, I think, to be honest, if I remember the first time I came across ConvertKit might have even been either from Pat Flynn, or just another fellow podcaster Louis Grenier like one or two of them, I think, one or two of those places I heard about it, but it was just really good to see sort of like how well you're using the influences in the space and having your focus on getting the larger picture. pick the right ones as well.

Nathan BarryYeah, yep, that played a huge role. So Pat was an early influencer for us. And he got a ton of customers. And then like that would be one example. And then another would be now they're good friends of mine, Seth and Katie, who run wellness Mama, which is a massive health and wellness blog. They came on and actually signed up for ConvertKit the same day padded in July 2015. And they both moved over giant lists and it was a fun day. MRR went from 10,000 a month to 15,000 a month in that single day. But then, you know, they were influencers and promoting as well, once they got set up and going so you ended up with still within the blogger podcaster sort of community. Pat really promoting and talking about ConvertKit to his audience and then Seth and Katie to their audience and then just as more people came on, it got a lot of traction so creators and bloggers ended up being great market because, like, I don't know, let's say we're just doing business with the local Chamber of Commerce and Serving small businesses. Yeah, if I love your product, I might tell like two or three friends who also run businesses, and it could be a good fit for you. But in this case, like bloggers like Pat and others when they love ConvertKit, they're like, great, let me just tell 10,000 of my closest friends, no big deal. You know. And so even in the case, like, there's just a lot of traction there, and then you get little powered by ConvertKit that shows up at the bottom of some opt in forms and emails. And it just really goes a long ways.

Andrew MichaelAbsolutely. And then how did this sort of switch and focus like influence your product strategy as well was any influence from that side as well?

Nathan BarryWell, so the first thing is going after bloggers or creators, I knew who I could listen to feedback from and who I could ignore. And then as you get those first customers, people like, comment, if you built this feature, it you know, then you'd unlock so much growth. And if if that was coming from a creator, and it was, you know, a creator focused feature, then I'd really listened to Think about it. But if it was coming from someone who was doing direct marketing or ran a sales team and wanted to integration with, you know, Salesforce or something like that, then I think hard about him. I don't, I don't think this is the right fit. So that's kind of where, like, the way that I think about it is it lets you know, okay, this is where I'm going to sue. I'm serving long term. And then you can filter all of your product feedback through that.

Andrew MichaelYeah, absolutely. And like really knowing what weights to give feedback as well, because I think that's one of the biggest challenge is a lot of times is you receive so many so much feedback and people I think struggle like specifically not having an issue of knowing what feedbacks important and what not. So, at this point as well, like before you started to double down on the niche and have a clear focus from one end, you said sort of like growth was struggling at that point, and then this sort of unlocked new growth for you. Do you see a difference? terms as well in terms of the retention of customers once you really had that focus and had doubled down on the niche was any sort of positive effects on that side as well.

Nathan BarryI think there was but the numbers at that point were so small that you know, calculating percentage churn when you're at 5000. And MRR

Andrew Michaelis just doesn't really just getting noise. Yeah.

Nathan BarryYeah. And then it can swing wildly. And actually, we even still face us today, like a $2,000 a month, customer cancels or, you know, something like that revenue churn will will spike like, you know, point 4% you're like, Okay, that's annoying, you know? Yeah. So you have to be careful and look at just these things over a large aggregate. I would say that everything did trend down overall, but I don't know there's that huge difference.

Andrew MichaelI think you make a valid point as well. And I think this is often like early stage is not to get too lost in the numbers as well because they can have a very, very big variance. If one of your biggest customers leave And then automatically, you'd see a spike in churn. So it's also like I think this is something talked about a lot on the podcast. But it's really good to have a good grasp and good understanding of the metrics early on. But when it comes to sort of understanding, engaging the product, you also need to have that balance between qualitative feedback and quantitative data, because sometimes just get too much noise with the data.

Nathan BarryYep, for sure. And I think, you know, anything over 10,000 or anything under probably 10 20,000. Mr. You don't really care about the percentage. That's true. You should care about who specifically is turning in why,

Andrew Michaeland watching on from them. Yep. So then you you went on, so this was like, How long ago? Did you switch over to create it?

Nathan BarryThat's a good question. We had a lot of traction when we switched over. We were maybe at 500,000 a month in revenue or something, when that would be 2017. Maybe.

Andrew MichaelAlright, so it's still been a couple of years. Yeah, yeah. I think I've been a customer now for maybe just over a year. Oh, just Yeah, like when I launched the podcast, we're actually coming up on the mark Now, every year for the last 50 something weeks, and I remember coming in customers looking at your pricing and packaging at the time and being a new podcast, like I was expecting to sort of find a plan that would be able to help me get started. And there wasn't anything at the time. But like I was really investing in the podcast, I was serious about it. And I wanted to make it work. I think maybe I associated myself with the pro side and naively to begin with. And and I see recently as well, that you've also gone under sort of a pricing and packaging change now. Can you talk us through that change a bit, sort of what motivated what what was the thought process behind it?

Nathan BarryYeah, so first, the well, training were sorry, start with thought processes. Start with the change. Maybe on the thought process side, a few trends that we're noticing in our business is focusing on a nice couple things. churners rush to the hi hi So hovering around, say four and a half to 5% user churn and just slightly lower on the revenue churn side. That's per month. And that's just churn as calculated by parametric. So there's nothing fancy in there. Sometimes when you hear people talk about churn, they're, they're like, Oh, we don't count anything in the first 90 days. churn is, you know, so it's just straight churn. And then we were finding that our lowest priced accounts, so it started $20 a month for up to 1000. email subscribers have the highest churn, so when you split it out, when you look at net churn, you're looking at a 12%, churn on those accounts, and then a net negative churn on every other plan. You know, because as if someone's got 5000 subscribers, they're gonna grow to eight, they're gonna grow to 10 and then they upgrade from there. So we realize that there's just an incredible amount of churn being driven at the low end. And then the next thing that we saw as we kind of dug into this further is all the cancellation reasons People had coming in. They were saying, usually, it's too expensive. Or I'm not ready to start my online business or get going. And so you have those factors. And then the final factor was that we added this onboarding survey. There's a certain user experience called gradual engagement. And it's basically that, instead of asking somebody to do something big up front, like fill out a registration form or something like that, you can ask them really simple questions that where it's like aerobie to draw them in, and then once they're a little bit invested, they will be more likely to fill in an email address or password or some more of those things. So we put in the signup survey that just asked them Hey, are you just are you migrating for another tool or are you brand new to email marketing, and a ton of people were taking brand new so we get about 8000 trials a month, and roughly 6000 of them were brand new are a little more. And then within there if this is your brand new ask, do you have a website yet or not? And about 5000 trials a month, we're saying, I don't have a website. And so if you think about the number of people who are coming in, who don't have a website yet, and are trying to use an email marketing service, like they're not going to be successful. No. So the first thing that we did based on that is that we built out a landing pages product, we'd always had landing pages as part of ConvertKit, but like, tiny, you know, there were four templates and and so basically, over the last year, we built out landing pages. So all these people who are saying I want to build an audience, but I don't have a website yet, can jump in and do that and can have a good experience doing it. So that that worked really well. We're starting to see a ton of traction there. But then then all I saw was part of the problem. The other part is people canceling because they're not ready or turning out and really having to pay before they find success. And so rather than going for a much longer trial or something else, we decided that it's time to go to a free plan. And so, five weeks ago, we released a free version of ConvertKit. That includes, you know, building landing pages, and thank you pages and growing your email list for up to 100 subscribers. And then we'll actually, I guess, I should split it up in a few different ways. It includes all the landing pages, opt in forms, and thank you pages. And so you can grow your list. And then we have a referral feature in there where if you invite a friend, basically, for every friend, you invite, you get an additional hundred subscribers managed for free, so kind of Dropbox style. Yeah. And that you can do up to 1000 subscribers. And that's been going. So we've had all that out for five weeks now. We have 13,000. for users that have signed up in that time, about 2000 of them come from that referral, invite a friend feature, and we're just kind of like that's our initial first take at it, but overall, it's going well and we expect mean a big Change that we expect right away is returned to drop. Because all these people before, who were signing up trying it and then canceling and showing up at our turn numbers, yep, are now just going to be on free and stay on free until they find value. So churn should go through the floor. But we'll see if new revenue goes to Florida match because that obviously wouldn't be good.

Andrew MichaelYeah, and I think that's probably to be expected or that you see this dip in revenue, considering that you had so many pain you before. But I think one of the things as well that's often overlooked as well in these cases is that's short term gains the revenue there but if you have these customers with you, they grow with you. And then you have expansion, they end up sticking with you sort of looking at some of the long term effects on being able to retain more premium users and then being able to, as you say, effectively done now already with referral program, like these interest compound with retention and the referral mechanism and word of mouth, like eventually, really driving it. I think you can afford to have some short term losses too. gain some long term gains as well.

Nathan BarryYeah. And just for anyone considering going to freemium, like a big concern for us, and what I wish I could have found more information online about is like what happens to those existing users who now qualify for the free plan? And like, how many are going to downgrade? So we actually did all the math, we looked up, you know, out of all of our 28,000 paying customers, how many of them have under 100 subscribers? That's the number that, you know, most people in the free plan are going to get to really easily. Yeah, and how many were downgraded. We found there's, like, a frighteningly high number. It was 9000 customers, which are $29 a month represents almost a quarter million a month of MRR. Yeah, so you know, at the time that we're recording this, we've got just shy of 1.7 million a month of MRR, so we're at a little over 20 million error. So it would be just a massive, massive hit to our business. And that's like more than our monthly profit right? Right at our monthly profit to lose 250 grand of MRR, so we're like, okay, we can't have that. So we had to really be deliberate about how we roll out our, you know, our free plan. So we as we're trying to decide what to include in it, what not to two things we held back were automations, which is a really important part of our product. But you can still, you know, get that new podcast off the ground, using your landing pages, and then grow your email list and just use broadcast emails to get started. And then once you've got a couple hundred subscribers, then you know, you're like, Okay, this podcast is happening, let's upgrade to paid and, you know, let's go from there. So that and then, you know, we didn't provide enough support. So for anyone on the free plan, we launched a community and we drive everyone to the community for for support. So those are the big changes and then we kind of released it in like, you know, email their whole list let everybody know. In waiting, see how many downgrades came in and in the month of January Blow No way. So we could have had 250,000 of Mr. contraction based on this. And we had just about 5000 a month of contraction. Oh, and so I was like, oh,

Andrew Michaelokay, that helps you sleep easier though a lot.

Nathan BarryYeah. And so we still grew by a little over 30,000 of net new Mr. January, even when we, you know, made a move to like blow up our whole business model. And so I was like, okay, we're gonna have more contractions. We go into February and March, but like not a crazy amount. And so now we're just getting more aggressive with promoting our free plan and trying lots more experiments.

Andrew MichaelI'd be super interested to hear how it goes over the next like five to six months and Sure, yeah, that's an interesting time. definitely consider it's only five weeks old. Did you notice anything in like this first quarter now? So you maybe had a month or two of like month one retention? Was there change or is it still too early for you to see

Nathan Barrypeople are a lot more engaged.

Andrew MichaelWith

Nathan BarryYeah, you know, there's just there's not a clean cohort yet. We've been Yeah, like, literally actually and all that. We've seen our visit to account created signup rate go from 3% to 5%. So that's a nice little lift. We'll try to get that to 8%. Over time. You know, that's kind of our initial goal. So I don't know that we've seen much else. It's been, it's been so new, and there's so many things in our data that we are having to tweak or get right from our numbers. So like, one big thing is, like, we're still figuring out Okay, now that we're free, what's our definition of an active, like an active user? Is just they logged in that month, or do they have to get at least five subscribers first or publish a landing page or what

Andrew Michaelsort of experimentation and understanding a little bit bit of the middle?

Nathan BarryYep, exactly. You know, the other thing is how many Free users we can get to refer to I have some metrics there that I'll pull up right now. Yes, we've had almost 2000 referred accounts created. And there if someone sends a referral invite, they're getting accepted at a rate of about 20%. Okay. And so that's another number that we can tweak. Yeah. So we're kind of just watching all these different things, starting to set up cohort analysis of, Okay, what, you know, what makes this cohort refer. There's one other thing that I want to share. Oh, the next big experiment that we're doing, actually launching tomorrow is sort of a flipped onboarding funnel. So right now, you know, you create a free account, and then you can build forms and landing pages. Yep. And we're flipping it where when you come to the site, you'll just be able to start building a landing page, and then sort of like choose your template and start customizing it. And then from there, we'll say, Hey, this is looking pretty good. Why don't you save your work? And yeah, save your work asks for Any email or

Andrew Michaelpassword, going back to your earlier points is all of sort of having that vested interest and then asking for the details. Yeah,

Nathan Barryyeah. So it's another further implementation of gradual engagement, which is like, my favorite onboarding idea. Yeah. And then the idea is, like to get a successful user, I need them to create a landing page. So why not just have them create a landing page first. So we're gonna launch all that I'm actually launching it on Product Hunt tomorrow morning. So we'll see how that goes. But I think that'll get a good amount of traction. And that's what I'm hoping will further increase our visitor to free account created conversion rate while maintaining like a good, good number of active users, you know, because I don't just want like to increment the user column in the database I want like users that are active and getting value and publishing landing pages.

Andrew MichaelYeah, I think this is also an excellent way of sort of meeting the product with marketing is an exceptional way in the sense that a lot of times like where we create marketing campaigns To draw people to websites, they sign up and they start trying to use the product. And then they realize that the product is not for them. But this way, it sounds like they're on this side, they start using the product, and then they decide it's for them and they sign up. So I think in one sense, as well, you also have a really big uptick in retention just as a result of like really allowing users to play around feel if it's right for them first and then get started. Yep, I think it'll make a big difference. I think we'll definitely need a follow up episode on these two topics. For sure. One random question there Nathan. How is it like to grow up with two first names as a name and surname?

Nathan BarryAh, yeah, you know, it doesn't actually come up that often with Nathan Berry, but I have an uncle whose first name he married at the family but his first name is Barry and that was the first time I had this moment of like way Why is my last name the same as your first name? You know, I remember be like nine years old now like yeah, huh?

Andrew MichaelI'm obviously I'm asking because my name is Andrew Michael. And like, I get this all the time. Like I go to a government office and they'll say, what's your surname? And I'll say it's Michael. And they'll say, No, no, what's your surname? And I have to explain to him like, I'm 34 years old now. I think I've learned myself. They say,

Nathan Barryoh, man, you know, the other thing that my team does is they like to use berry as a replacement for a very, okay. Oh, that's a very good design. Or that's, well, actually my car. I on a year and a half or so ago, I got a Tesla Model S and my CFO came to visit at one point because we're a company I'm in Boise, Idaho. He's in Portland, Oregon. And he came to visit he was driving a car for some reason. And I get an after him, I realize he's renamed the car very good Tesla. And I've actually it's now a year and a half later now.

Andrew MichaelYeah. Nice. Well, going back to the topic of the show, then something I ask every guest to the joins and I'd love to get your input on as well as, let's Imagine a hypothetical scenario now that you've joined a new company, and you arrived, the company in general attentions not doing great. And you've been tasked by the CEO of this company to try and help turn things around. And you've been given 90 days to try and like get some results for the company. What could you be doing in those first 90 days to try and turn things around for them?

Nathan BarryYeah, I would start with conversations with users. Both the users that we say, you know, we've decided our most successful and those that are churned and I'd separated them in the churned users into two different cohorts. One the churn the active churn users, so they found value with the product. In our case, it'd be like, you know, they added our forms to their website and they imported subscribers and they were really using the product and they turned, you know, so why is that? And then the other one is the, you know, they signed up and started paying but honestly, they never on boarded. And I think you do a huge disservice when you lump those two groups of people into a single number. Because it's just it's so messy and confusing and, and all that. So one will tell you if your products not very good, and like competition is stealing all your best users. And then the other will tell you if you're onboarding and your product, but largely, your onboarding. activation is not very good. And you're just not getting people on boarded. Because it's the second one that I would start by putting someone specifically on it where it's just like, great. I will, I mean, depends on the size of the business and all that. But just onboard every single user yourself. It's a great you know, schedule a call, we'll set you up right now. We have to we did we migrated every user from MailChimp or AWeber, or Infusionsoft and build up their funnels for them and digital on on calls. And turns out human activation like that works pretty well. Yeah,

Andrew Michaeland thanks in a way to then figure out what scales and will what you need to try and scale and then go from there.

Andrew MichaelAn interesting aspect I think, also that you mentioned, like making sure that you group them into different buckets is also critical, like understanding, like you say, what is part of like the product fault, and maybe the competition, having a better product, but then also, like having the understanding of what percentage of return is coming just from bad onboarding, I think is key because this is something that comes up a lot in the show that obviously, onboarding is one of the biggest areas and biggest opportunities, but what you're just sort of explaining as a way as well to try and understand what percentage is coming from bad onboarding. So I like that a lot.

Nathan BarryYeah, so I have a phone, onboarding that I want to come back to but really quick and the way that we sort out churn between user churn and revenue churn, and it tells us different things. I think as an industry, we should be separating out. I don't know what to call it active churn versus deadweight churn or, you know, but I would like to see that that's separate. And then I'd like to See those buckets of so it's almost a quadrant. four ways we're on our left axis, we've got, you know, the two options are active or inactive customers are active versus never on boarded, customers never found value. And then, you know, on the on the bottom axis, there would be, you know, user churn and revenue churn. So you can see how that breaks out now into four buckets.

Andrew MichaelYeah, I think I think this makes a lot of sense as well, definitely, in the sense that also that I think, one question that was posed early on in the podcast show, I think, was actually understood from our funnel. He was interested to find out what percentage of SAS businesses active subscriptions are dormant. It's a lot and it's a lot. Yes. And I think like what you're saying as well as like having a measure of this as well. There's also really interesting to understand, okay, of the customers are churned, how many of them were actually dominant customers and just sort of like, the moment I think we've classified as delinquent churn when the critical eventually expires or whatnot, but I'm sure a lot before it could be to what you're saying is like, never have been onboard correctly, not ever being activated and just end up just signing up for something and forgetting about it and just eventually something happened that was out of your control and ended up turning that.

Nathan BarryYeah. Or they just decide I'm not gonna like to sit on the credit card bill, and I haven't thought about ConvertKit in three months, I should just cancel it, you know. And so it's not technically delinquent churn at that point, but they were never, they never ever got value. And that's so different than the person who's like using ConvertKit for their blog every day and they're like, Oh, I'm gonna switch to MailChimp permanent, do something else. You shouldn't bucket those together. Okay, onboarding thoughts here. I think everyone does onboarding wrong. When people talk about onboarding, they say, Okay, here you are, you're gonna know you're the new head of onboarding you got brought in to solve this activation problem. Everybody's not getting counted up in the turning up because of it. Everyone's going around saying okay, Why in app action? can I do? Let's do tooltips? Let's do a product tour, like let's tweak the emails. And I think it's largely a waste of time. Yeah, I think instead, you should. Maybe this is harsh, but it's what we did, you should re evaluate your entire product, at least the first, the first whole section that people interact with. So we spent a ton of time in our product, adding tooltips and checklists and, and guided product tours and improving our videos and stuff like that. And it it all helped, but it didn't make a huge difference. But then what we did all the changes that I just talked about of saying, okay, we're going to scrap the entire signup flow, forget it. I don't even want your email address until you've already successfully built a landing page, we're going to flip that entire funnel and start from scratch. And then, you know, on our marketing site, we're actually going to have now we have three or four different flows. So depending on if you're migrating from another tool or if you're starting from scratch, it is It sends you down these different paths. And so we really said, Okay, what does success look like, as a user of our product? And we realized, oh, okay, it's, it's getting a landing page built for all these beginners. And so we just got rid of everything that wasn't helping people accomplish that one goal. And the nice thing is, is we can spin up in a in a separate product flow. So it doesn't mess with everybody who's saying like, they're coming in from migrating front of the tool or their from our pricing page. So we can test all of these things. But I guess my point overall, is that I think people need to be far more radical with their onboarding. And if you just give that task to some growth marketer or some product manager and say, I don't know, figure out how to tweak our onboarding to get it from 8% activation to 9%. Then of course, you're going to do incremental things. But you need like a designer and executive backing in and out and a whole initiative to say like alright, screw everything that we have. Now. If we could start from How do we do it? How do we achieve this outcome of a truly successful customer? And, you know, that's my advice right now. I guess we'll see how it plays out for ConvertKit over the next.

Andrew MichaelYeah, I think it's absolutely right on the sense of like, a tool tips and messages, like emails can only move the needle so much, and especially like thinking about a new user coming into your product, I think so much. So too often, like we get caught up in our own biases. And we think things are really easy, or things are really straightforward. And we think we know what's best for our customers. But really, sometimes it's like really breaking it down to the bare essentials, like what is this customer absolutely need to be to be successful? And let's help them get there and do that and create a habit out of that. And then from there, like, show them the rest of the product, I think definitely is the way to go. So I'm agreeing with you and listening because I've seen it play out many times as well in previous companies to Great point. So, Nathan, it's been excellent having you on the show today. I think we're ready Coming up on time now, is anything final thoughts when they leave the listeners with? How can they keep up to speed with what's going on at ConvertKit?

Nathan BarryYeah, well, I think Final Thoughts is just

coming out. I always go back to Gail Goodman's talk from the software years ago about the SAS, long slow ramp of death. And basically just that reminder that SAS takes forever. And so even as all these changes, you're like not making progress on churn or whatever else I keep in mind. Keep at it, talk to more users, and it's just gonna take a long time. But the nice thing is you've got recurring revenue, it's worth it, the business is going to be highly valued. So like, keep chipping away at the problem. Just don't let yourself get totally discouraged. In the meantime, I'd say how to follow me. You know, I read a lot of my blog and Nathan, very calm, and the whole ConvertKit story and all the way along. Is there if you want to follow along with our metrics, and see, like, can we actually move the needle insurance What is churn sitting at today? I'm going to look but if you go to ConvertKit dot bear metrics comm that's all there update in real time you can see our Mr. And everything else revenue churn is currently sitting at 4.8%. So that's high. We'll see how the next six months ago trying to drop that down. And then Twitter. I'm always on twitter at Nathan Berry. Those would be the places to follow me. And then if you want to use ConvertKit I think that would be awesome. And you can now sign up for free at ConvertKit calm.

Andrew MichaelYeah, I definitely recommend that. So like I said, I've been using it for over a year now. I'm super happy with the service. So it's been a pleasure having you today Nathan and wish you best of luck. Now, probably like I said, I'd love to have you back in the next six to eight months is all to hear how these next two experiments go with your freemium and the updates to the onboarding. So good luck with me.

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The show

My name is Andrew Michael and I started CHURN.FM, as I was tired of hearing stories about some magical silver bullet that solved churn for company X.

In this podcast, you will hear from founders and subscription economy pros working in product, marketing, customer success, support, and operations roles across different stages of company growth, who are taking a systematic approach to increase retention and engagement within their organizations.